Let's Build A Tech Startup In ... Rwanda?

04/01/2014 | By Karsten Strauss | Forbes.com

Top tech entrepreneurs and financiers are not necessarily queuing up to kick off an enterprise in Rwanda. That said, sub-Saharan Africa is on the radar of private equity firms and the country is one of five taking the bulk of that foreign capital influx. Plus, Africa in general has the tech world’s attention as an emerging market. Rwanda’s recent past may evoke images of machetes and strife but it would be foolish not to recognize that emerging markets are nothing if not rich in potential.

Sweden-based telecom firm, Millicom, is making a quick bet on Rwandan entrepreneurship. The company recently announced that it is building a tech incubator called Think in the east African nation’s capital, Kigali. The company intends to seek out ambitious entrepreneurs and provide seed financing, structured training and coaching programs to help them on their way. The company also promises to help test products and will open up paths to foreign investment. In return, Millicom is expecting equity in scalable businesses that emerge from Think.

Rwanda has some interesting currents of momentum in its favor: according to the World Bank poverty rates are dropping, school enrollment has trended up and about 30% above averages of other sub-Saharan nations, it ranks 58 out of 183 nations in terms of ease of doing business, direct foreign investment has jumped up sharply in recent years and Rwanda’s Information Technology Authority completed a nationwide 1,430-mile fiber-optic network. This is not to say that Rwanda’s 12 million people are a vast untapped reservoir of tech innovation and entrepreneurial zeal, but it’s not a bad start for a nation only one generation removed from a harrowing genocidal civil war that left as much as 20% of the population dead.

But there’s a bigger picture here that should be good news. By United Nations numbers, Sub-Saharan Africa absorbed $3.7 billion in private equity investment last year, largely in the oil and gas industries (a 50% bump up from 2012). Most of those deals happened in Kenya, South Africa, Nigeria, Ivory Coast and Rwanda. PE firms putting their money down are doing so on savvy, not faith—the rate of return on foreign investment in Africa is 9.3%. That figure beats out developed countries andthe world average.

The tech world is interested too. Last year saw more tech investment in Africa than yet recorded, according to Crunchbase; and ventures by IBMIBM -0.48%, MicrosoftMSFT -2.76%’s incubator investments development program 4Afrika, as well as IntelINTC -0.93%’s investments in early stage companies there – and new money from Rocket Internet and Tiger Global – suggest the money-stream will likely grow stronger.

Suddenly it doesn’t seem quite so odd, the prospect of starting up in Rwanda.